Rick Rasmussen - Product First and Foremost - Startup AddVenture Eastern Europe 2015
Rick Rasmussen is a Silicon Valley native with entrepreneurial, executive, government and academic experience focusing on startups and growth stage companies. He works extensively with governments and economic development agencies looking to connect with Silicon Valley. He is an active member of the Sand Hill Angels investment group. He served as the VP of Business Development for nestGSV, a large-scale accelerator in Silicon Valley where he focused on International Business Development and Acceleration Programs. Prior, Mr. Rasmussen served as the Trade Commissioner for the Canadian Department of Foreign Affairs and International Trade with responsibility for linking Canadian IT companies to the Valley. Prior, he served as an Entrepreneur-in-Residence at Institutional Venture Partners, Interim CEO for @Road, President and CEO for BuzMe.com. He currently advises a half-dozen companies in mobile and international social media and serves as a Director of CritterPix, an animated feature film startup in Marin County, CA. His professional experience includes C-Cube Microsystems (LSI) where he was Vice President of Marketing and General Manager and helped drive the digital video revolution in consumer, computer and communications markets. He was a senior member of the team that took the company from startup through IPO and Fortune 500 status. Prior he spent nine years at LSI Logic where he spearheaded new development of RISC microprocessors, Digital Signal Processors and standard cell product lines culminating as the General Manager of the MIPS Microprocessor Division. Mr. Rasmussen earned a Electrical Engineering and Computer Science degree with highest honors from the University of California at Berkeley and an dual MBA degree from UC Berkeley’s Haas School of Business and Columbia’s Graduate School of Business in New York City with honors. He currently lectures on Entrepreneurship at both UC Berkeley and Stanford University.
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Rick Rasmussen - Product First and Foremost - Startup AddVenture Eastern Europe 2015
- 1. RICK RASMUSSEN CONCORDIA VENTURES PRODUCT FIRST AND FOREMOST (VS. ACCIDENTAL PRODUCT) #STARTUPADDVENTURE
- 2. Outsourcing ! Product • Building your outsourcing business • Finding a product opportunity • Oops – this is harder than I thought • Planning and prep to build a great product company
- 3. Outsourcing / Contract Work • Low capital requirements • Hiring Talented Engineers • Finding customers with revenue generating projects • New and repeat business. People Revenue
- 4. Leading outsourcing economies G20 India Russia China Canada Brazil Mid-size Economies Pakistan Ukraine Spain Netherlands Ireland Developing Economies Armenia Czech Republic Romania Poland Hungary Estonia Source: Cybermedia
- 5. Outsourcing CEO Admin Sales Engineer Engineer Engineer Engineer Engineer Engineer More revenue? Just add more engineers (minus overhead, efficiency, etc).) Maximum revenue per year is limited to: (number of consultants) x (hours worked per year) x (billing rate)
- 6. Issue: Scale People • Business scales with number of engineers • Can only grow by adding people • No revenue leverage Revenue People
- 7. ACME Industries Custom Telecom Project Custom Datacom Custom Security Custom CRM Custom CRM • MediumRsized*“workRforRhire”*software* firm* • Good*engineering*talent* • Average*size*project*is*$20k* • All*trained*by*the*best*local*schools*
- 13. Oh Look… Common Requirements • Let’s become a product company…!!! • Paying customers • Our development is leveraged – Use existing code – Multiply and go • Happens all the time..!
- 14. What’s wrong with this? • An Accidental Product • Little thought about – Market size – Customer needs – Support requirements – Marketing and Sales
- 15. Product-based Business • Works on principles of leverage – “Develop once, sell many” • Starts with a tested Unmet Need and large potential market • Risk capital funding used to develop and deliver product or service High risk and potentially high reward
- 16. Product-based businesses are Scalable • Requires cash to get started • Business scales as a function of marketing and sales • Suffer through the Valley of Death
- 17. Product Company CEO Admin Sales Marketing Engineering Operations Finance • Functional Organization • Potential to scale and leverage resources • Can be much higher revenue per employee
- 18. Do your homework – are you ready? • Unmet Need identified • MVP built, tested against market • Sustainable and repeatable sales cycle • Large global market waiting for you? Customer Discovery Customer Validation Customer Creation Company Building
- 19. If Yes….. It’s time to go ALL IN!
- 20. Risks: Management Distraction • Management needs to run one company, not two • Your business needs your focus • Split into two
- 21. Risks: Cultural Rift • Product people are the stars • Contractor people view themselves as slugs • Bring a small team over. Do it only once.
- 22. Risks: Cash Flow People Revenues Plus May equal negative cash flow Not good for either business
- 23. Unprepared Startups get stuck Here
- 24. Form a Spin-Off New Product Company Outside Investors Contract Company • Management • Funding • IP
- 25. Do Your Projections • Account for everything needed Yr 1 Yr 2 Yr 3 Yr 4 Yr 5 Yr 5% Revenues Product Line 1 $314 $1250 $4000 $8000 $10500 18.8% Product Line 2 $4 $375 $1500 $5000 $40000 71.4% Srvcs & Maint $35 $750 $2250 $3500 $5500 9.8% Total Revenue $353 $2375 $7750 $16500 $56000 100% Cost of Sales $265 $1125 $3700 $8350 $25700 45.9% Gross Income $88 $1250 $4050 $8150 $30300 54.1% Expenses R&D $411 2269 2538 2806 3443 6.1% S&M $237 1659 1732 1610 1842 3.3% G&A $162 1647 1940 2196 2281 4.1% Other $65 360 485 600 765 1.4% Net Income (787) (4685) (2645) 938 21969 39.2%
- 26. File as a Delaware C Corp • Establishes your desire to be a global company • Able to attract stronger interest from investors • OK to operate out of home country as long as it makes sense – Lower labor costs – Stable workforce • Speak with an attorney about tax and IP considerations
- 27. Build a Great Product Team • Investors • Board of Directors • Co-founders • Your executive staff • Board of Advisors (optional) • Service Providers – Attorneys, Accountants, Recruiters, PR firms, Outsourcers… Investors Board You Co-founders Advisors Exec Staff Team Service Providers
- 28. Build a Full Company Timeline Q3Q1 Q2 Q7Q6 Q8 Cash Flow Positive Series B $7M Started company MVP Full Production Q9 Series A $2M Second prototype Closed Beta1st alliance signed Seed $100K Q4 Q5 Employees: 4 6 9 10 11 14 18 22 24 Q10 1M Users
- 29. Build a Global Sales Strategy Bootstrap Revenues/seed Series A/B exit Early- Vangelists CEO Selling Sales Channel Strategy Customer Validation Through Completion Hire first Sales Persons Full Product And Company Launch Multiple Channels Strong Growth
- 30. Bring on a Strong Financial Team Bootstrap Revenues/seed Series A/B exit CPA setup You or part-time bookkeeper CPA and Attorney Review Full-time Bookkeeper or Controller Controller and Part-Time CFO Hire CFO
- 31. Put systems in place to grow globally • Engineering – Choose the right language platform(s) – Strong testing methodology – Outsourcing only with great specifications – Great GUI and multi-language support • Marketing – Messages for each geography • Sales – Global distribution strategy • Operations: – Mindful of costs and multiple supply sources
- 32. Be mindful of Global Cultures Lewis Model of Cross-Cultural Communication
- 35. International Selling Product and Features Relationship 7 meetings Family, formal Family, trust Cost, speed, opportunisticHistory, connections Culture is so important to know and understand
- 36. Conclusions • Think like a product company from day one • Separate product from contracting/outsourcing – Personnel – People – Customers • Be mindful of cultures and attitudes • Go Global right from the start
- 37. Don’t build your product on a bad foundation Plan on being global. Project forward. Build a solid foundation
- 38. Even castles made of sand fall into the sea, eventually – Jimi Hendrix Plan…! Otherwise,